⌚ Compare And Contrast Delta Airlines Oligopoly
Oligopoly Part 1: What is an Oligopoly?
The first, and perhaps the most critical, step in forecasting financial requirements is to forecast future sales. The AFN equation produces more accurate forecasts than the forecasted financial statement method, especially if fixed assets are lumpy, economies of scale exist, or if excess capacity exists. Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity between common stock and retained earnings. One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM. Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios. Companies can repurchase shares to distribute large inflows of cash, say from the sale of a division, to stockholders without paying cash dividends. Stockholders pay no income tax on dividends if the dividends are used to purchase stock through a dividend reinvestment plan. If a company uses the residual dividend model to determine its dividend payments, dividends payout will tend to increase whenever its profitable investment opportunities increase.
The stronger management thinks the clientele effect is, the more likely the firm is to adopt a strict version of the residual dividend model. A dollar paid out to repurchase stock is taxed at the same rate as a dollar paid out in dividends. Thus, both companies and investors are indifferent between distributing cash through dividends and stock repurchase programs. Capital gains earned in a share repurchase are taxed less favorably than dividends; this explains why companies typically pay dividends and avoid share repurchases. Such an announcement could lead to a stock price decline, but this does not normally happen. The clientele effect is the best explanation for why companies tend to vary their dividend payments from quarter to quarter.
One nice feature of dividend reinvestment plans DRIPs is that they reduce the taxes investors would have to pay if they received cash dividends. Empirical research indicates that, in general, companies send a negative signal to the marketplace when they announce an increase in the dividend, and as a result share prices fall when dividend increases are announced. The reason is that investors interpret the increase as a signal that the firm has relatively few good investment opportunities. If a company wants to raise new equity capital rather steadily over time, a new stock dividend reinvestment plan would make sense. However, if the firm does not want or need new equity, then an open market purchase dividend reinvestment plan would probably make more sense.
Under the tax laws as they existed in , a dollar received for repurchased stock must be taxed at the same rate as a dollar received as dividends. One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to their account. Stock repurchases make sense if a company expects to have a lot of profitable new projects to fund over the next few years, provided investors are aware of these investment opportunities.
One advantage of an open market dividend reinvestment plan is that it provides new equity capital and increases the shares outstanding. One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their ownership in the company. The optimal capital structure minimizes the cost of equity, which is a necessary condition for maximizing the stock price. The optimal capital structure simultaneously minimizes the cost of debt, the cost of equity, and the WACC. As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected EPS.
The capital structure that minimizes the required return on equity also maximizes the stock price. The capital structure that minimizes the WACC also maximizes the price per share of common stock. The capital structure that maximizes expected EPS also maximizes the price per share of common stock. Which of the following is NOT directly reflected in the cash budget of a firm that is in the zero tax bracket? The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the day forward market. The yen-dollar exchange rate in the day forward market equals the yen-dollar exchange rate in the day forward market. Call options give investors the right to sell a stock at a certain strike price before a specified date.
LEAPS are very short-term options that were created relatively recently and now trade in the market. An option holder is not entitled to receive dividends unless he or she exercises their option before the stock goes ex dividend. Put options give investors the right to buy a stock at a certain strike price before a specified date. Burnham Brothers Inc. This same situation is expected to persist in the future.
The company uses the CAPM to calculate its cost of equity, and its target capital structure consists of common stock, preferred stock, and debt. Neither project is sensitive to changes in the discount rate, since both have NPV profiles that are horizontal. One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future. One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid. Interest rates are currently high. However, you believe that money costs and thus your WACC will soon decline. You also think that the projects will not be funded until the WACC has decreased, and their cash flows will not be affected by the change in economic conditions.
You should delay a decision until you have more information on the projects, even if this means that a competitor might come in and capture this market. You should reject both projects because they will both have negative NPVs under the new conditions. One drawback of the regular payback for evaluating projects is that this method does not properly account for the time value of money. The regular payback ignores cash flows beyond the payback period, but the discounted payback method overcomes this problem. If a company uses the same payback requirement to evaluate all projects, say it requires a payback of 4 years or less, then the company will tend to reject projects with relatively short lives and accept long-lived projects, and this will cause its risk to increase over time.
Since depreciation is a non-cash expense, the firm does not need to deal with depreciation when calculating the operating cash flows. The WACC used to discount cash flows in a capital budgeting analysis should be calculated on a before-tax basis. Revenues from an existing product would be lost as a result of customers switching to the new product. Shipping and installation costs associated with a machine that would be used to produce the new product. The cost of a study relating to the market for the new product that was completed last year. The results of this research were positive, and they led to the tentative decision to go ahead with the new product. The cost of the research was incurred and expensed for tax purposes last year. It is learned that land the company owns and would use for the new project, if it is accepted, could be sold to another firm.
This space could be used for other products if it is not used for the project under consideration. A good example of a sunk cost is money that a banking corporation spent last year to investigate the site for a new office, then expensed that cost for tax purposes, and now is deciding whether to go forward with the project. An example of a sunk cost is the cost associated with restoring the site of a strip mine once the ore has been depleted. A sunk cost is any cost that was expended in the past but can be recovered if the firm decides not to go forward with the project. A sunk cost is a cost that was incurred and expensed in the past and cannot be recovered if the firm decides not to go forward with the project. Sunk costs were formerly hard to deal with but now that the NPV method is widely used, it is possible to simply include sunk costs in the cash flows and then calculate the PV of the project.
A sunk cost is any cost that must be expended in order to complete a project and bring it into operation. The company previously thought its fixed assets were being operated at full capacity, but now it learns that it actually has excess capacity. What is the maximum sales growth rate North could achieve before it had to increase its fixed assets? Consider two very different firms, M and N. Firm M is a mature firm in a mature industry. Its annual net income and net cash flows are both consistently high and stable. Firm N is a relatively new firm in a new and growing industry.
Its markets and products have not stabilized, so its annual operating income fluctuates considerably. However, N has substantial growth opportunities, and its capital budget is expected to be large relative to its net income for the foreseeable future. Which of the following statements is correct? Firm N is likely to have a clientele of shareholders who want to receive consistent, stable dividend income. Since the plan is expected to increase EPS, this implies that net income is also expected to increase.
Under the plan there will be more bonds outstanding, and that will increase their liquidity and thus lower the interest rate on the currently outstanding bonds. Start paying its bills sooner, which would reduce the average accounts payable but not affect sales. Which of the following will cause an increase in net working capital, other things held constant? If purchasing power parity PPP holds, what is the price of the product in Switzerland? Suppose Yates Inc. In order to close the sale, Yates agreed to make the bill payable in yen, thus agreeing to take some exchange rate risk for the transaction.
The terms were net 6 months. If the yen fell against the dollar such that one dollar would buy Points: 4. Only numbers are allowed to be input into the social security number field and dashes are pre-formatted. Each sales order is given an identifier that is also tagged to the receipt of goods record, the customer invoice record and the cash receipts record. The auditor must realize that most people are honest and not automatically assume that fraud exists when planning the audit. The auditor must not be aggressive in its initial approach to fraud as trust may be lost by the client. BlizzardCraft erroneously treated the acquisition of Simco as a purchase transaction when it should have been a pooling of interests.
Studying public problems in order to provide policymakers with information about the options for action available to them is part of. Designing a job so that those holding it experience greater meaning and derive greater satisfaction from it is called. A study of the degree to which pothole repairs last through the winter season would be an example of an evaluation concerned with. The basic federal legislation governing employment practices with respect to equity and related issues is the. Under considerable fiscal stress, as a result of a decline in federal aid and increased federal mandates, states have. The arrangement of jobs on the basis of their duties, responsibilities, and skills is prepared in.
The purpose for identifying the longest possible time it will take to complete a project in a PERT analysis is to. Even for those interested mainly in business the study of public administration is important because. The idea that a bureaucracy of professionals, who follow the mandates of a legislature, can meet the administrative requirements of a democracy is called the doctrine of.
Three important cultural values that have helped shape the ideas of democracy in the United States are. A grant from the national government that could be used only for a specific, limited purpose, is called a. Romney Paul J. Would you, or any organization, ever produce information if its expected costs exceeded its benefits? If so, provide some examples. If not, why not? Or does achieving one mean sacrificing another? You came up with a great idea for a new mobile phone application that you think will make lots of money.
Give several examples of how differences among organizations are reflected in their AIS. What does this imply about the degree to which an innovative system developed by one company can be transferred to another company? How can a company determine whether it is spending too much, too little, or just enough on IT? Explain how it would perform the various primary and support activities. Discuss the following issues:. Write a two-page report describing what you think the nature of the accounting function and the accounting information system in a large company will be like in the year Mobile phone makers in Japan have gone beyond the imagining phase.
Cell phones in Japan are becoming more versatile than ever. Newer models of cell phones contain a myriad of applications and can do many of the things that a personal computer PC can do. PCs are also able to function as phones. A small but growing number of professionals are trading in their laptops for handheld computers. Cell phone manufacturers in the United States and elsewhere are quickly catching up to their Japanese counterparts.
In the article, Ackoff identified five common assumptions about information systems and then explained why he disagreed with them. Prepare a report in which you defend your stand and explain your defense. What kinds of input or output documents or forms would you find in the production or conversion cycle? Do an internet search to find the answer and to find example turnaround documents. What are the advantages and disadvantages of following this advice? To what extent should accountants be involved in producing reports that include more than just financial measures of performance?
It also sells fertilizer and potting soil. Design a coding scheme for your nursery. At closing, Jill gives both the cash and the register tape to her manager. What general design principles and limitations are common to both documentation techniques? For each symbol, suggest several uses. Dub 5 produces computer keyboard components. It has been producing keyboards for more than 20 years and has recently signed an exclusive year contract to provide the keyboards for all Dell personal computers.
You have finished gathering all the information you need to develop the first-pass DFD and now want to complete the diagram. Describe which perspective is most useful for each of the following employees: a programmer, a manager, and an internal auditor. How will understanding logical data structures assist you when designing and using database systems? Spreadsheets are another tool that accountants use to employ a tabular representation of data. What are some similarities and differences in the way these tools use tables? Which alternative do you think is most likely to occur? Does this mean that online, real-time processing should be used for all transactions?
Does an organization need real-time financial reports? Why or why not? Explain the main advantages of database systems. For each of the following, indicate which language would be used and why. Write queries to answer the following questions. Each employee may possess one or more specific skills and several employees may have the same skill. Include the following facts in the database:. Specify primary and foreign keys, and enforce referential integrity. Demonstrate the soundness of your design by entering sample data in each table. Some customers make installment payments on each invoice. Others write a check to pay for several different invoices.
Indicate which attributes are primary and foreign keys, and enter sample data in each table you create. Research how businesses are using DBMSs, and write a report of your findings. Address the following issues:. Does this seem ironic? What should a company do to ensure the integrity of its employees? What is kiting and what can your company do to prevent it? How would you respond to the confession? What issues must you consider before pressing charges? Seven months later, when the system crashed, Revlon blamed the Logisticon programming bugs they discovered and withheld payment on the contract. Logisticon contended that the software was fine and that it was the hardware that was faulty. When Revlon again refused payment, Logisticon repossessed the software using a telephone dial-in feature to disable the software and render the system unusable.
After a three-day standoff, Logisticon reactivated the system. Revlon sued Logisticon, charging them with trespassing, breach of contract, and misappropriation of trade secrets Revlon passwords. Logisticon countersued for breach of contract. The companies settled out of court. Would you find the company guilty of committing a computer crime? Be prepared to defend your position to the class. Richard Stallman, a computer activist, believes software licensing is antisocial because it prohibits the growth of technology by keeping information away from the neighbors.
He believes high school and college students should have unlimited access to computers without security measures so that they can learn constructive and civilized behavior. He states that a protected system is a puzzle and, because it is human nature to solve puzzles, eliminating computer security so that there is no temptation to break in would reduce hacking. Is ethical teaching the solution to computer security problems? Would the removal of computer security measures reduce the incidence of computer fraud?
Classify each of the five situations as a fraudulent act, an indicator of fraud, or an event unrelated to the investigation. Justify your answers. After John creates a fictitious purchase, he notifies Alice, the accounts payable ledger clerk, so she can enter them in her ledger. Although many people perceive that the major threat to computer security is external, the more dangerous threats come from insiders. Management must recognize these problems and develop and enforce security programs to deal with the many types of computer fraud. Explain how each of the following six types of fraud is committed. Using the format provided, also identify a different method of protection for each and describe how it works.
Fraud prevention and detection require that pressures and opportunities be identified and evaluated in terms of the risks they pose to a company. Adapted from the CMA Examination. Records indicated that several vehicles with recent major repairs were sold at negotiated prices. Management vigorously assured the auditor that performing limited repairs and negotiating with knowledgeable buyers resulted in better sales prices than the sealed-bid procedures. Further investigation revealed that the vehicles were sold to employees at prices well below market value.
Three managers and five other employees pleaded guilty to criminal charges and made restitution. On May 10, when the customer called for a loan pay-off balance so he could sell the car, he learned that the payment had not been credited to the loan. On May 12, the customer went to the bank to inquire about the payment and meet with the manager. The manager said the payment had been made on May The customer was satisfied because no late charge would have been assessed until May The manager asked whether the auditor was comfortable with this situation.
The auditor traced the item back through the computer records and found that the teller had processed the check as being cashed. The auditor traced the payment through the entry records of May 11 and found that the payment had been made with cash instead of a check. What type of embezzlement scheme does this appear to be, and how does that scheme operate? Police alleged that he created fictitious invoices from two companies that had contracts with the Olympic Committee: International Protection Consulting and Languages Services. He then wrote checks to pay the fictitious invoices and deposited them into a bank account he had opened under the name of one of the companies. When he was apprehended, he cooperated with police to the extent of telling them of the bogus bank account and the purchase of the Mercedes-Benz and the CD.
The accountant was a recent honors graduate from a respected university who, supervisors stated, was a very trusted and loyal employee. She interviewed Accounts Payable employees and created the flowchart of the current system shown in Figure The company mainframe at corporate headquarters is linked to the computers at each branch location by leased telephone lines. The mainframe generates production orders and the bills of material needed for the production runs. From the bills of material, purchase orders for raw materials are generated and e-mailed to vendors.
Each purchase order tells the vendor which manufacturing plant to ship the materials to. When the raw materials arrive, the manufacturing plants produce the items on the production orders received from corporate headquarters. The manufacturing plant checks the goods received for quality, counts them, reconciles the count to the packing slip, and e-mails the receiving data to Accounts Payable. If raw material deliveries fall behind production, each branch manager can send emergency purchase orders directly to vendors.
Emergency order data and verification of materials received are e-mailed to Accounts Payable. Since the company employs a computerized perpetual inventory system, periodic physical counts of raw materials are not performed. Vendor invoices are e-mailed to headquarters and entered by Accounts Payable when received. This often occurs before the branch offices transmit the receiving data. Payments are due 10 days after the company receives the invoices. Using information on the invoice, Data Entry calculates the final day the invoice can be paid, and it is entered as the payment due date.
Once a week, invoices due the following week are printed in chronological entry order on a payment listing, and the corresponding checks are drawn. The check number is printed by the computer, displayed on the check and the payment listing, and validated as the checks are signed. After the checks are mailed, the payment listing is returned to Accounts Payable for filing. When there is insufficient cash to pay all the invoices, the treasurer retains certain checks and the payment listing until all checks can be paid. When the remaining checks are mailed, the listing is then returned to Accounts Payable. Often, weekly check mailings include a few checks from the previous week, but rarely are there more than two weekly listings involved.
Accounts Payable processes weekly summary performance reports for each cost center and branch location. The answers, as well as an explanation of each answer, are provided at the end of the article. Read and answer the questions in three of these articles, and then check your answers. How does Miller fit the profile of the average fraud perpetrator? Leasing USL computers began acting sluggishly, computer operators were relieved when a software troubleshooter from IBM called. When he offered to correct the problem they were having, he was given a log-on ID and password. The next morning, the computers were worse.
USL was also concerned that the intruder had devised a program that would let him get back into the system even after all the passwords were changed. What could USL do to avoid these types of incidents in the future? Why has hacking become so popular in recent years? Do you regard it as a crime? Explain your position. IT initially suspected a cable break or an operating system failure, but diagnostics revealed nothing.
The virus was eventually traced to the computers of unsuspecting UCLA students. Later that evening, the system was brought back online after infected files were replaced with backup copies. When March 6 arrived, the virus did minimal damage. Preventive techniques limited the damage to isolated personal and business computers. Due to the increased incidence of fraud and identity theft, we are asking all bank customers to verify their account information on the following Web page: www. Please confirm your account information as soon as possible. Failure to confirm your account information will require us to suspend your account until confirmation is made. Technical services at Big Bank is currently updating our software.
Therefore, we kindly ask that you access the website shown below to confirm your data. Otherwise, your access to the system may be blocked. RAN is a free service for Big Credit Card customers that substitutes a random credit card number in place of your normal credit card number when you make online purchases and payments. This random number provides you with additional security. Before every online purchase, simply get a new number from RAN to use at each new vendor. Sign up for an account at www. Also, take advantage of the following features:. Terms may be used once, more than once, or not at all. Monday morning, the situation became worse when employees logged on to their computers.
Even stranger things happened—operating room doors would not open, pagers would not work, and computers in the intensive care unit shut down. By A. They discovered that the hospital was under attack by a botnet that exploited a Microsoft operating system flaw and installed pop-up ads on hospital computers. Each infected computer became a zombie that scanned the network looking for new victims. With the network clogged with zombie traffic, hospital communications began to break down. Monday afternoon IT figured out which malware the bots were installing and wrote a script, which was pushed out hourly, directing computers to remove the bad code. The script helped to slow the bots down a bit. How did Shadowcrew members concealed their identities?
What internal control elements do you think can help compensate for this threat? Discuss this position. Discuss whether it is necessary for this corporation to take any further action to comply with the Sarbanes—Oxley Act. This ticket is handed to another person at the entrance to the movie. What kinds of irregularities is the theater trying to prevent? What controls is it using to prevent these irregularities? What remaining risks or exposures can you identify? Each food server uses these checks to write up customer orders. Food servers are told not to destroy any customer checks; if a mistake is made, they are to void that check and write a new one. All voided checks are to be turned in to the manager daily.
How does this policy help the restaurant control cash receipts? During this visit, the following events occurred:. Also, suggest one or more procedures to reduce the risk and exposure highlighted in each example. Agents submit a completed expense reimbursement form to their branch manager at the end of each week. It has three clerical employees who must perform the following functions:. Assuming equal abilities among the three employees, the company asks you to assign the eight functions to them to maximize internal control. Assume that these employees will perform no accounting functions other than the ones listed. Two internal control procedures have been proposed to deal with this problem.
If both procedures were implemented, likelihood would be reduced to 0. Among the benefits are reliable financial records that facilitate decision making and a greater probability of preventing or detecting errors and fraud. In its latest review, the internal audit staff found the following eight conditions:. For the situations presented, dDescribe the recommendations the internal auditors should make to prevent the following problems. Situation 1: Many employees of a firm that manufactures small tools pocket some of the tools for their personal use. Since the quantities taken by any one employee are immaterial, the individual employees do not consider the act as fraudulent or detrimental to the company.
The company is now large enough to hire an internal auditor. One of the first things she did was to compare the gross profit rates for industrial tools to the gross profit for personal tools. Noting a significant difference, she investigated and uncovered the employee theft. Auditors suspected something was wrong when they could not find any entries regarding this fake subsidiary office in the property, plant, and equipment ledgers or a title or lease for the office in the real-estate records of the firm.
Its internal audit department completed an audit of its expenditure processes. Part of the audit involved a review of the internal accounting controls for payables, including the controls over the authorization of transactions, accounting for transactions, and the protection of assets. The auditors noted the following items:. RRReview the eight items listed and decide whether they represent an internal control strength or weakness. For each internal control weakness you identified, explain why it is a weakness and recommend a way to correct the weakness. The company is located in Kearns, Utah, so it can be close to the Olympic Ice Shield, where many Olympic speed skaters train.
Given the precision required to make skates, tracking manufacturing costs is very important to management so it can price the skates appropriately. To capture and collect manufacturing costs, the company acquired an automated cost accounting system from a national vendor. LRC operates one shift, five days a week. As a result, the cost accounting system produces a report that compares actual costs with standards costs and provides the difference, or variance. Management focuses on significant variances as one means of controlling the manufacturing processes and calculating bonuses. Each store has a full-time, salaried manager and an assistant manager. The sales personnel are paid an hourly wage and a commission based on sales volume.
The company uses electronic cash registers to record each transaction. The cash register automatically assigns a consecutive number to each transaction. The cash register prints a sales receipt that shows the total, any discounts, the sales tax, and the grand total. The salesperson collects payment from the customer, gives the receipt to the customer, and either directs the customer to the warehouse to obtain the items purchased or makes arrangements with the shipping department for delivery.
The salesperson is responsible for using the system to determine whether credit card sales are approved and for approving both credit sales and sales paid by check. Sales returns are handled in exactly the reverse manner, with the salesperson issuing a return slip when necessary. At the end of each day, the cash registers print a sequentially ordered list of sales receipts and provide totals for cash, credit card, and check sales, as well as cash and credit card returns. The assistant manager reconciles these totals to the cash register tapes, cash in the cash register, the total of the consecutively numbered sales invoices, and the return slips. Cash sales, check sales, and credit card sales are reviewed by the manager, who prepares the daily bank deposit.
The manager physically makes the deposit at the bank and files the validated deposit slip. At the end of the month, the manager performs the bank reconciliation. The cash register tapes, sales invoices, return slips, and reconciled report are mailed daily to corporate headquarters to be processed with files from all the other stores. Corporate headquarters returns a weekly Sales and Commission Activity Report to each store manager for review. PEI processes its records with stand-alone, incompatible computer systems except for integrated enterprise resource planning ERP inventory and accounts receivable modules.
PEI decided to finish integrating its operations with more ERP modules, but because of cash flow considerations, this needs to be accomplished on a step-by-step basis. It was decided that the next function to be integrated should be sales order processing to enhance quick response to customer needs. In an effort to reduce the number of slow-paying or delinquent customers, PEI installed Web-based software that links to the Web site of a commercial credit rating agency to check customer credit at the time of purchase.
The following are the new sales order processing system modules:. Guisti originated the loans; when each one matured, he would take out a new loan, or rewrite the old one, to pay the principal and interest due. Some loans had been rewritten five or six times. These people denied receiving stolen funds or knowing anything about the embezzlement. The fifth name was James Vanesse, who police said did not exist.
Lucy Fraioli, a customer service representative who cosigned the checks, said Guisti was her supervisor and she thought nothing was wrong with the checks, though she did not know any of the people. Marcia Perfetto, head teller, told police she cashed checks for Guisti made out to four of the five persons. Guisti was authorized to make consumer loans up to a certain dollar limit without loan committee approvals, which is a standard industry practice.
News reports raised questions about why the fraud was not detected earlier. Several reasons were given for the failure to find the fraud earlier. First, in checking for bad loans, bank auditors do not examine all loans and generally focus on loans much larger than the ones in question. Second, Greater Providence had recently dropped its computer services arrangement with a local bank in favor of an out-of-state bank. Guisti was a frequent gambler and used the embezzled money to pay gambling debts.
Second, bank owners took the bank private after a lengthy public battle with the State Attorney General, who alleged that the bank inflated its assets and overestimated its capital surplus to make its balance sheet look stronger. The bank denied this charge. The toughest thing is to decide how much reliability is enough. Consider an application like e-mail. The key to effectiveness, however, is that it changes employee behavior. How can organizations maximize the effectiveness of their security awareness training programs? Write a report explaining the weaknesses identified by the tool and how to best correct them. Attach a copy of the MBSA output to your report.
Apply the following data to evaluate the time-based model of security for the XYZ Company. Does the XYZ Company satisfy the requirements of the time-based model of security? Research each of these three attacks and write a report that explains in detail how each attack actually works and that describes suggested controls for reducing the risks that these attacks will be successful. You can find the article at.
Firewalls are one of the most fundamental and important security tools. You are likely familiar with the software-based host firewall that you use on your laptop or desktop. Such firewalls should also be installed on every computer in an organization. However, organizations also need corporate-grade firewalls, which are usually, but not always, dedicated special-purpose hardware devices. Conduct some research to identify three different brands of such corporate-grade firewalls and write a report that addresses the following points:.
Design a checklist for assessing each of the 11 detailed information security control objectives. Provide a brief reason for asking each question. Organize your checklist as follows:. From the viewpoint of the organization desiring to collect such information? What about the embedding of RFID tags in products such as clothing? What other technologies might create privacy concerns? The job requires you to move across the country.
The company sends you a digital signature along with the contract. How does this provide you with enough assurance to trust the offer so that you are willing to make the move? This involves classifying information into discrete categories. Propose a minimal classification scheme that could be used by any business, and provide examples of the type of information that would fall into each of those categories. Use it to create SHA or any other hash algorithm your instructor assigns hashes for the following:.
Further protect the spreadsheet by limiting users to only being able to select and enter data in the six cells without borders. What are its capabilities for limiting access rights? Write a report of your findings. Optional: If you can download and install IRM software, use it to prevent anyone from being able to copy or print your report. The flip side of the issue is ensuring that employees respect the intellectual property of other organizations. Research the topic of software piracy and write a report that explains:. Research at least two certificate authorities and write a report that explains the different types of digital certificates that they offer.
What are the essential control procedures that organizations should implement when using encryption? The department of taxation in your state is developing a new computer system for processing individual and corporate income-tax returns. The new system features direct data input and inquiry capabilities. Identification of taxpayers is provided by using the Social Security number for individuals and federal tax identification number for corporations. The new system should be fully implemented in time for the next tax season.
Processing will include four steps:. The state commissioner of taxation and the state attorney general are concerned about protecting the privacy of personal information submitted by taxpayers. They want to have potential problems identified before the system is fully developed and implemented so that the proper controls can be incorporated into the new system. Describe the potential privacy problems that could arise in each of the following three areas of processing, and recommend the corrective action s to solve each problem identified:.
You will find it located under professional resources and then information technology. Use it to answer the following questions:. What are the relative advantages and disadvantages of these two approaches? Be prepared to defend your answer. Enter the following data into a spreadsheet and then perform the following tasks:. Pay rate Hours worked. Net pay Give a specific example of an error or probable error in the data set that each of the following controls would detect:. It serves fewer than 2, members, who are numbered sequentially from the founder, Tom Eagle , to the newest member, Jacques Noveau Members rent the flying machines by the hour, and all must be returned on the same day.
The following six records were among those entered for the flights taken on September 1, Enter the data in a spreadsheet and create appropriate controls to prevent or at least detect the input errors. Assume that all data in the first column are correct. Cases a through d each contain an input error in one record, along with a batch total computed from that set of records. For each case a-d , compute the difference between the correct and erroneous batch totals and explain how this difference could help identify the cause of the error.
The clerk entering details about a large credit sale mistakenly typed in a nonexistent account number. Consequently, the company never received payment for the items. MMI is an online pharmaceutical firm. The data center is installed in the basement of its two-story headquarters building. The data center is equipped with halon-gas fire suppression equipment and an uninterruptible power supply system. The computer operations staff works a two-shift schedule, five days per week. Programmers make changes in response to oral requests by employees using the system.
Since the programming staff is small and the work demands have increased, systems and programming documentation is developed only when time is available. Backups are made whenever time permits. The backup files are stored in a locked cabinet in the data center. Create data validation rules in a spreadsheet to perform each of the following controls:. The Journal of Accountancy available at www. Read section AI6 in version 4. However, it may not be feasible for every auditor to be a computer expert. Discuss the extent to which auditors should possess computer expertise to be effective auditors. Which approach would you support, and why? An investigation revealed that she had embezzled a large sum of money from Tustin in this manner over a long period. What weaknesses existed in the audit approach?
How could the audit plan be improved? What internal control weaknesses were present in the system? The note indicated that there are some fictitious employees on the payroll as well as some employees who have left the company. He offers no proof or names. Explain the four steps of the risk-based audit approach, and discuss how they apply to the overall security of a company. Recently, you met with Issa Arnita, the manager of administrative data processing, and expressed the desire to establish a more effective interface between the two departments. Issa wants your help with a new computerized accounts payable system currently in development.
He also wants internal auditing to make suggestions during system development, assist in its installation, and approve the completed system after making a final review. You have been reviewing the internal controls of the computer system that processes most of its accounting applications. You have interviewed the information system manager, operations supervisor, and other employees to complete your standardized computer internal control questionnaire. You report to your supervisor that the company has designed a successful set of comprehensive internal controls into its computer systems.
He thanks you for your efforts and asks for a summary report of your findings for inclusion in a final overall report on accounting internal controls. List five examples of specific audit procedures that you might recommend before reaching a conclusion. To test the computer systems and programs, you submit independently created test transactions with regular data in a normal production run. Your audit plan requires the use of the computer, but you encounter the following reactions:. The edit summary report listing no errors was included in the working papers, with a notation by the senior auditor that the test indicates good application controls. You note that the quality of the audit conclusions obtained from this test is flawed in several respects, and you decide to ask your subordinates to repeat the test.
Identify three existing or potential problems with the way this test was performed. For each problem, suggest one or more procedures that might be performed during the revised test to avoid flaws in the audit conclusions. From an AW manual, you have obtained the following job descriptions for key personnel:. Director of information systems: Responsible for defining the mission of the information systems division and for planning, staffing, and managing the IS department. Manager of systems development and programming: Reports to director of information systems.
Responsible for managing the systems analysts and programmers who design, program, test, implement, and maintain the data processing systems. Also responsible for establishing and monitoring documentation standards. Manager of operations: Reports to director of information systems. Responsible for management of computer center operations, enforcement of processing standards, and systems programming, including implementation of operating system upgrades. Data entry supervisor: Reports to manager of operations.
Responsible for supervision of data entry operations and monitoring data preparation standards. Operations supervisor: Reports to manager of operations. Responsible for supervision of computer operations staff and monitoring processing standards. Data control clerk: Reports to manager of operations. Responsible for logging and distributing computer input and output, monitoring source data control procedures, and custody of programs and data files. Name two positive and two negative aspects from an internal control standpoint of this organizational structure. The input to this system is shown in Table You are using an input controls matrix to help audit the source data controls.
Place checks in the matrix cells that represent input controls you might expect to find for each field. Under the old system, applicants for welfare assistance completed a form giving their name, address, and other personal data, plus details about their income, assets, dependents, and other data needed to establish eligibility. Periodically, recipient circumstances income, assets, dependents, etc. Welfare assistance amounts to several hundred million dollars annually.
You are concerned about the possibilities of fraud and abuse. Robinson is considering the following software packages:. The distributor keeps its inventory in its distribution center and in two public warehouses. At the end of each business day, it updates its inventory file, whose records contain the following data:. You will perform the following audit procedures:. Explain why that function should have primary responsibility and why the others should not. As transactions are processed, summary journal entries are added to the general ledger file at the end of the day. At the end of each day, the general journal file is processed against the general ledger control file to compute a new current balance for each account and to print a trial balance.
The following resources are available as you complete the audit:. Create an audit program for Preston Manufacturing. For each audit step, list the audit objectives and the procedures you would use to accomplish the audit program step. To what extent do you think concerns about privacy-related issues affect the use of CRM systems? How does this affect each of the four main activities in the revenue cycle? Review the information typically presented in such a report see Figure Which specific metrics can be calculated from those data that might be especially useful in providing early warning about looming cash flow or bad-debt problems?
How can information technology help accomplish that objective? What are the barriers, if any, to its use in B2C commerce? What are the advantages and disadvantages of electronic cash to customers? To businesses? What are some of the accounting implications of using electronic cash? Weisel, in the December issue of the Journal of Accountancy. The corporation is 10 years old and uses an integrated ERP system. The administrative offices are located in a downtown building and the production, shipping, and receiving departments are housed in a renovated warehouse a few blocks away.
All sales are on credit, FOB destination. Customer orders are picked and sent to the warehouse, where they are placed near the loading dock in alphabetical sequence by customer name. The loading dock is used both for outgoing shipments to customers and to receive incoming deliveries. There are ten to twenty incoming deliveries every day, from a variety of sources. The increased volume of sales has resulted in a number of errors in which customers were sent the wrong items. There have also been some delays in shipping because items that supposedly were in stock could not be found in the warehouse. Although a perpetual inventory is maintained, there has not been a physical count of inventory for two years.
When an item is missing, the warehouse staff writes the information down in log book. Once a week, the warehouse staff uses the log book to update the inventory records. The system is configured to prepare the sales invoice only after shipping employees enter the actual quantities sent to a customer, thereby ensuring that customers are billed only for items actually sent and not for anything on back order. Describe the problem resulting from each weakness. Recommend control procedures that should be added to the system to correct the weakness. It employs seven salaried physicians, ten nurses, three support staff, and three clerical workers.
The clerical workers perform such tasks as reception, correspondence, cash receipts, billing, and appointment scheduling. All are adequately bonded. Most patients pay for services rendered by cash or check on the day of their visit. Sometimes, however, the physician who is to perform the respective services approves credit based on an interview. When credit is approved, the physician files a memo with one of the clerks to set up the receivable using data the physician generates. At the end of the day, one of the clerks uses the bills to prepare a revenue summary and, in cases of credit sales, to update the accounts receivable subsidiary ledger.
The front office clerks receive cash and checks directly from patients and give each patient a prenumbered receipt. The clerks take turns opening the mail. The office is closed from 12 noon until p. During that time, the office manager takes the daily deposit to the bank. During the lunch hour, the clerk who opened the mail that day uses the list of cash receipts and checks to update patient accounts.
The clerks take turns preparing and mailing monthly statements to patients with unpaid balances. One of the clerks writes off uncollectible accounts only after the physician who performed the respective services believes the account will not pay and communicates that belief to the office manager. The office manager then issues a credit memo to write off the account, which the clerk processes.
The office manager supervises the clerks, issues write-off memos, schedules appointments for the doctors, makes bank deposits, reconciles bank statements, and performs general correspondence duties. Additional services are performed monthly by a local accountant who posts summaries prepared by the clerks to the general ledger, prepares income statements, and files the appropriate payroll forms and tax returns.
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